Can A Deed In Lieu Of Foreclosure Be Shown As Foreclosed On A Credit Report?

A deed in lieu of foreclosure is exactly what the name implies. It is a process that occurs in lieu of foreclosure. After the processes have ended, a full foreclosure should not be reflected on an individual’s credit history. The mortgage account should reflect a deed in lieu, which is better than a full blown foreclosure, but not by much. Anything helps, however, when an individual is attempting to rebuild credit.

Choosing a deed in lieu of foreclosure should be done only as a last resort to stop foreclosure. To do this, you voluntarily return the property to the lien holder. This does not save your home, and does not save your credit. However, a deed in lieu of foreclosure does less overall damage to your credit than a foreclosure, albeit by a very small step. This is a last resort for individuals who are for some reason unable to refinance or sell, and who do not qualify for a repayment or mitigation plan.

Another major benefit to a deed in lieu is that it provides final closure and does not allow for deficiency judgments after foreclosure. After the long, rigorous process of foreclosure and losing the house, weary homeowners are often sued by the mortgage holder for the amount they still owe on the loan after the proceeds from the sheriff’s sale are deducted. Banks are also at liberty to increase the amount due with tens of thousands of dollars in fees. With the current economy, most properties have declined in value and are unlikely to fetch the balance due on the loan when sold at auction.

A deed in lieu stops the foreclosure process immediately. This provides relief for a tired homeowner who has decided it is no longer worth his or her time and effort to fight the bank in an attempt to retain the property. When a person has no option that does not include losing the home, ending the foreclosure process becomes the next priority.

Individuals who wish to quickly move on after this failed financial investment can help themselves by opting for a deed in lieu. A long string of late mortgage payments does more damage to a homeowner’s credit. Every month a payment is late it is reported to the credit bureaus. A homeowner can begin establishing credit again quickly after a deed in lieu transaction--without the terrible burden of a foreclosure hanging over their heads.